I am getting married in August of 2015. I have $6,000 in debt that I would really like to pay off before the wedding. This is spread between two credit cards and one personal loan I recently took out for a medical bill. Ideally I would like to close one of the credit cards and just keep one open for emergencies.

Several months ago I paid off my car in full. It's KBB value is between 7-8k. (My car is a small sedan which worked great when I lived in CA... now I live in UT and need something that has 4 wheel drive and would have the space to transport a child in the future.) I really don't want another car payment, but would it be worth looking into selling my car to pay off my debt and then financing a new car with that being my only financial obligation? (Obviously outside of regular bills like cell phone and car insurance.)

Oh, let me add that I have good credit and could get a low interest rate through our local credit union on the auto loan.

Thanks in advance for the advice!

Wed Dec 31, 2014 6:12 pm

oldguySenior Member

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Congratulations! And best wishes.

quote: but would it be worth looking into selling my car to pay off my debt and then financing a new car with that being my only financial obligation?

That is an excellent plan - the interest on a collateralized loan is much lower than the interest on signature loan or revolving credit.

In fact, that is close to what I do - and I'm retired & wealthy (I have no need for a car loan). Say I want to buy a $30k car - 2 choices:

1. I could sell $33k of stock, use $3k to pay the capital gains tax on my profits, and use $300k to buy the car.
2. Instead, I finance the entire cost of the new car, including tax & license. Plus I sell our old car privately for say $k or $5k and add that to the stock fund. So I'm leaving about $38k in the fund - that fund has a longterm average return of 11%/yr,. Via the Rule of 72, the money doubles about every 7 years, my $38k goes to $76k. Meanwhile I make payments on the $30k for 5 yrs (about a $33k cost). I keep the loans for the full term, car loans are a good source of inexpensive capital.

If you go up to some of the UT Ski Resorts, check the parking lots, you'll see lots of Subarus - Foresters, Outbacks, are great ski haulers - and Subaru literally invented AWD in cars.

BTW, you have an 2nd option - ie, refi your current car. Most credit unions will give you a decent rate and up to 48 months on used cars - so if the car KKB is $8k, you might get close to the $6k on loan. (But a new Subby would be way more fun!)

Wed Dec 31, 2014 8:23 pm

blixetPreferred Member

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quote: 1. I could sell $33k of stock, use $3k to pay the capital gains tax on my profits, and use $300k to buy the car.

You must have a sack of magic beans!

Information is more valuable sold than used ‚Äď Fischer Black

Wed Dec 31, 2014 9:07 pm

oldguySenior Member

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quote: You must have a sack of magic beans!

LOL - I could have an 18-wheeler for that kind of money.

Wed Dec 31, 2014 9:43 pm

WinoSenior Member

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That is a terrible plan. Do not buy a new car. You cannot afford it. You are in debt. A new car loses about 40% of its price (I hesitate to say "value") within the first two years. That means if you get a $30K car, it will be worth $18K in two years. You don't have that kind of money to lose if you're fretting over paying off $6K in 8 months.

Oldguy's method is financially tenable AFTER you have cash invested, but it is too dangerous before you have a cushion. There is too much chance that you buy the car, and "invest" the difference, then something goes wrong, and you have to cash out your investment which may have lost money. You now have a loss, a payment, and a car worth half what you paid for it.

Instead, pay off the debt as quickly as you can. If your sedan is front-wheel drive, then you can continue to drive it in UT. You are rationalizing a new car in your head because you want a new car, not because you actually need one.

That is definitely not a massive debt to get off, so I will say donít worry itís not that hard to get it off. I had around $3,500 debts few years back which I got rid of pretty quickly with help of IVA, so I will suggest you to try that, I used www.IVA-Advice.co Company, so try it out they are pretty professional people, so apply for it and they will get back to you with all details.